Climate Active is dead. The funeral will not be certified carbon neutral

Australia's government-run 'carbon neutral' certification scheme is being wound up. It is good news for the climate.

Last week, the Albanese government announced that it would wind up Australia’s government-run carbon offsetting scheme, Climate Active. The message to companies is now clear: offsetting is not a viable path to decarbonisation and meaningful measures to reduce emissions must be prioritised.

Climate Active served as Australia’s largest ‘carbon neutral’ certification scheme, covering hundreds of major corporate brands, events and products. But in recent years, Climate Active came under mounting criticism as the environmental benefits of carbon offsetting came into question.

It has become evident that most of the carbon credits used to substantiate ‘carbon neutral’ certifications under Climate Active are essentially junk. This led to accusations that the scheme had become one big, government-endorsed, greenwashing exercise.

Almost three years after the Albanese government announced an intention to overhaul the scheme, it ultimately concluded that the time had come to bring Climate Active to an end.

The program had already been dying a slow death for many years. More than a hundred companies had withdrawn from the scheme after it became increasingly evident that participation in the scheme was more of a reputational risk than a benefit.

What went wrong for Climate Active?

The scheme suffered from some fairly fundamental flaws. The clearest being that Climate Active allowed companies to use offsets sourced from international voluntary offsetting schemes. These schemes have been criticised for issuing carbon credits for activities that achieved little, if any, real world emissions reductions. Some experts have stated that these carbon offsets suffer from ‘intractable’ flaws, and that they ultimately hinder, not help, the challenge of addressing climate change.

Most of these international carbon credits have been labelled ‘junk credits’. A Guardian investigation found that as much as 90 per cent of carbon offsets issued to projects claiming to protect rainforests were not backed by real world emissions reductions.

A review of offset use by Tempests and Terawatts showed that around 90 per cent of all offsets used under Climate Active were sourced from these kinds of international offset schemes. The junk credits were popular under Climate Active because they are incredibly cheap, but they are incredibly cheap because generating them does not require any meaningful effort towards cutting emissions.

The heavy use of these junk credits led to accusations that the Climate Active program amounted to a government-sanctioned greenwashing scheme. Companies were able to call themselves ‘carbon neutral’, while contributing very little in terms of real world climate action.

In fact, the scheme was so poorly designed that it left the companies that participated in it vulnerable to being sued for misleading and deceptive conduct.

The Parents for Climate v EnergyAustralia case - which was argued on the basis that EnergyAustralia had misled or deceived its customers about its ‘carbon neutral’ energy products - was probably the mortal blow to Climate Active.

The resulting settlement saw the largest participant in Climate Active, EnergyAustralia, agree to make a statement effectively disavowing the scheme. Annually, EnergyAustralia had offset around 1.5 million tonnes of customer emissions under Climate Active. This was more than double the offsets of the next largest participant. But the offsets used by EnergyAustralia were overwhelmingly sourced from international voluntary offset schemes, including those plagued with major concerns about their environmental integrity.

This left EnergyAustralia vulnerable to the greenwashing claim that Parents for Climate brought against it. As part of the resulting settlement agreement, a representative of EnergyAustralia publicly acknowledged that “while EnergyAustralia participated in the Climate Active certified carbon offset program in good faith, today EnergyAustralia accepts that there is legitimate public concern about the efficacy of these programs.”

EnergyAustralia withdrew from Climate Active and apologised to its customers. Its exit was followed by other large participants, including AGL, Westpac, ANZ and the Commonwealth Bank. Telstra had exited Climate Active earlier, announcing a commitment to invest in reducing its operational emissions, rather than offsetting them.

Some companies remaining in the scheme have subsequently become targets for greenwashing complaints. My employer, Climate Integrity, referred Qantas’ ‘fly carbon neutral’ scheme - which remains certified under Climate Active - to the ACCC for its potential to mislead customers over its environmental benefits. Around three-quarters of Qantas’ carbon offsets are sourced from international offsetting schemes.

A warning for broader climate policy

The Climate Active program is emblematic of a generation of well-intentioned climate policies that have long passed their use-by date.

The original incarnation of the program was created in 2010, as the National Carbon Offset Standard. At the time, carbon offsetting was accepted as a temporary way to account for emissions, but always with an understanding that more systemic actions to cut emissions would be needed. “Carbon neutral” was a positive, well-intentioned, commitment from those attempting to position themselves as leaders in climate action.

Carbon offset proponents offered a ‘get out of jail at low cost’ path to carbon neutrality, promising buyers that their purchase of offsets would help support the protection of forests from logging and avoiding increased fossil fuel use by funding wind and solar projects.

But as noted above, these promises often did not reflect the reality of what was happening in the real world. Often, carbon credits were used as an enabler of an expansion of fossil fuel production and ultimately supporting an increase in global emissions.

But in the 16 years since the carbon neutral certification scheme was created, the urgency and seriousness of the climate crisis has only grown. The impacts of climate change are now a present danger, not a future hypothetical. We no longer have the time for carbon offsetting.

Climate Active’s demise is reflective of the limited role that carbon offsetting should play in the response to the climate crisis. Decades of insufficient global action, and the growing urgency of the threats climate change poses to society, have only worked to heighten the need to focus on reducing emissions at their source. Offsets are no substitute for the need to make rapid and deep reductions in emissions, and to accelerate the phase-out of fossil fuel use.

It should also serve as a warning to broader government climate policy. The same foundational flaws that plagued the Climate Active program are also present in other government programs that are heavily reliant on the use of carbon offsets - such as the federal government’s Safeguard Mechanism.

Under its current design, the companies covered by the Safeguard Mechanism (the largest emitters being companies involved in coal and gas production) can use an unlimited number of carbon credits to meet their emissions reductions obligations. The scheme also rewards companies for incidental emissions reductions, such as a gas plant temporarily shutting down for scheduled maintenance. These flaws have disincentivised investment in long-term reductions in onsite emissions, and have contributed to the risk that Australia will fail to meet its 2030 and 2035 emissions reduction targets.

There is an urgent need to pivot these policies away from offsets and instead focus on how policy can best support investment in long-term, systemic, reductions in emissions. That is really the only viable path to achieving the ‘deep, rapid, and sustained reductions of greenhouse gas emissions’ that the Intergovernmental Panel on Climate Change has warned are necessary to limit global warming to within 1.5 degrees.